DanTien said:
Besides teaching your children how to FIRE, are you going to help them achieve it?
When the both of us have passed there will hopefully be something to pass along - it could be enough to make them FI whether or not they want to ER. So that's one way to help out.
But since we're going to live a long healthy life, they might have to wait a long time.
So, I've been mulling over passing along some of the money before that time. Right now we are going to give each $40k in cash at 25 (split over 2 years to avoid gift tax). Later thinking of passing more - not sure how to go about doing it - outright or a tax-deferred acount of ?
Later on if there are grandkids putting some into 529 accounts or ?
What will you do? Any ideas on how to gift the money?
Gotta know your own kids, but I'd think that giving them (or me) $20K at that age would have been quickly spent on home improvements or other entertainment. Or on a really hot small-cap stock! I think it's far better to give them the gift of benign neglect or occasional grandparent babysitting. But we're decades away from that experience so we know nothing.
I've watched parents try to educate their adult children financially (copies of Bogle or Bernstein) but that seems to be either ignored or despised as controlling. M*'s Vanguard Diehard board is full of those horror stories. But when I was in college I appreciated gift subscriptions to Business Week & Scientific American and I've kept them up for over 25 years.
I've seen parents pay for the family fantasy vacation (e.g., a four-generation reunion on a cruise ship) but even that has made progency feel coerced into spending time with their parents. A weekend backyard BBQ blowout is one thing, a week-long cruise is quite another. But you gotta know your kids.
Our kid sees us living the FIRE example every day. Usually she ignores us-- she thinks we go into suspended animation when she leaves for school and then we re-animate to bake cookies just before she gets home. But occasionally we'll bitch share our stories of a really busy day or tell her how we spent all that time on the beach.
We tell our kid that we hope she finds a career that she loves, and that if she LBYMs then she'll have more choices. And every time she tells us that she really likes the hot [car, laptop, electronic media, MTV crib] we tell her to get a really high-paying job. She saw a great sitcom episode once about adult kids whose parents refused to subsidize their kids' first apartment, allowing them to have their own thrilling experiences of independence & self-reliance. I think our kid gets it.
I'm still wrestling with learning the Hawaii state tax laws, but this year we're going to put the kid to work (rental property & home improvement projects) and fund her Roth IRA. I don't think she'll earn more than three figures for the first couple years but it's worth the compounding (or the house down payment). By the time she gets a real job the IRA habit will be ingrained.
I'm ambivalent about funding grandkid's college accounts. I think that kids do much better when they have a stake in their education. But I may be biased-- I have a nephew at West Point and we're watching a lot of our shipmates send their kids to the Naval Academy this year.
The nicest financial things my father/parents-in-law ever did for us was to talk about how they invest and what references they read-- not about how we should do it. We started out with their playbooks and then developed our own. We also enjoyed being their guests at the occasional Schwab free dinner investor's conference. Picking apart the speaker's ideas with them really taught us about the financial industry's business of fleecing attracting investors to the next hot idea.
Another really nice thing my father did for me was to disclaim my grandfather's inheritance. It was a tiny five-figure windfall, completely unexpected, and a nice boost to our kid's college savings fund. Of course I was 41 years old when that happened. But disclaiming an inheritance in favor of your kids (assuming that fits your own financial planning) is a great way to say "I love you" with no strings attached.
Jay_Gatsby said:
I'd consider helping my kids go FIRE, but only if they showed a willingness to exercise the degree of discipline required to do so. They say that family fortunes are squandered within three generations -- 1st generation makes it, 2nd generation manages it, and the 3rd generation spends it. It's possible to break this cycle, but only if the requisite knowledge and discipline are imposed early and repeated often.
Although I don't have any kids yet (not even married, but that's likely to change in the next year), I would be inclined to teach them the basics when they're old enough to understand the math. In fact, I'd even be willing to act as the "National Bank of Dad", offering CDs, investments, etc...until my kids are old enough to have savings accounts, CDs and investments of their own. As for giving them cash when they're in their 20s, I would make the money contingent on them taking finance and accounting classes in college (and receiving a minimum grade of "B"), as well as a few other adult-education classes on money management offered outside of the college environment.
Yes, I know, what 20-something would go through that kind of hassle for a few thousand bucks? Well, I know that I would have in my 20s, especially if I knew that I'd be receiving more money as time went on, ultimately culiminating in an inheritance worth millions of dollars.
I've read those statistics in Thayer Willis'
"Navigating the Dark Side of Wealth. One of the Johnson heirs has made a documentary on rich kids of legacy families... it's even worse than Paris Hilton. Fiduciary education (by anyone other than the parents!) is the key, and family banks have taken on a huge offspring-tutoring business in fiscal responsibility & charity.
David Owen's
"First National Bank of Dad" is a classic when they're young. We're still using it.
As for offering money in exchange for self-improvement-- in my 20s I would have regarded that as a really crappy second job. I was too busy screwing around leading my own life and I would have been perceived as coercive parental interference. But you gotta know your own kids.